IDEAS home Printed from
   My bibliography  Save this paper

Policy Trade-Offs in Building Resilience to Natural Disasters: The Case of St. Lucia


  • Mr. Gonzalo Salinas
  • Mr. Giovanni Melina
  • Mr. Alessandro Cantelmo
  • Mr. Leo Bonato


Resilience to climate change and natural disasters hinges on two fundamental elements: financial protection —insurance and self-insurance— and structural protection —investment in adaptation. Using a dynamic general equilibrium model calibrated to the St. Lucia’s economy, this paper shows that both strategies considerably reduce the output loss from natural disasters and studies the conditions under which each of the two strategies provides the best protection. While structural protection normally delivers a larger payoff because of its direct dampening effect on the cost of disasters, financial protection is superior when liquidity constraints limit the ability of the government to rebuild public capital promptly. The estimated trade-off is very sensitive to the efficiency of public investment.

Suggested Citation

  • Mr. Gonzalo Salinas & Mr. Giovanni Melina & Mr. Alessandro Cantelmo & Mr. Leo Bonato, 2019. "Policy Trade-Offs in Building Resilience to Natural Disasters: The Case of St. Lucia," IMF Working Papers 2019/054, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2019/054

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Borensztein, Eduardo & Cavallo, Eduardo & Jeanne, Olivier, 2017. "The welfare gains from macro-insurance against natural disasters," Journal of Development Economics, Elsevier, vol. 124(C), pages 142-156.
    2. Acevedo, Sebastian & Mrkaic, Mico & Novta, Natalija & Pugacheva, Evgenia & Topalova, Petia, 2020. "The Effects of Weather Shocks on Economic Activity: What are the Channels of Impact?," Journal of Macroeconomics, Elsevier, vol. 65(C).
    3. International Monetary Fund, 2018. "St. Lucia: Climate Change Policy Assessment," IMF Staff Country Reports 2018/181, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)


    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Dynamic General Equilibrium modelling of tiny countries
      by Christian Zimmermann in NEP-DGE blog on 2020-08-11 14:47:26


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Amr Hosny, 2021. "Adapting to Climate Change in Vietnam: Insights from a Structural Model," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 9(2), pages 145-152, June.
    2. Mr. Chris Papageorgiou & Mr. Giovanni Melina & Mr. Alessandro Cantelmo, 2019. "Macroeconomic Outcomes in Disaster-Prone Countries," IMF Working Papers 2019/217, International Monetary Fund.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kahn, Matthew E. & Mohaddes, Kamiar & Ng, Ryan N.C. & Pesaran, M. Hashem & Raissi, Mehdi & Yang, Jui-Chung, 2021. "Long-term macroeconomic effects of climate change: A cross-country analysis," Energy Economics, Elsevier, vol. 104(C).
    2. Carlos Adriàn Romero & Omar Osvaldo Chisari & Leonardo Javier Mastronardi & Arturo Leonardo Vásquez Cordano, 2015. "The cost of failing to prevent gas supply interruption: A CGE assessment for Peru," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2015(2), pages 131-148.
    3. Harriet Brookes Gray & Vis Taraz & Simon D. Halliday, 2021. "The Impacts of Weather Shocks on Employment Outcomes: Evidence from South Africa," Bristol Economics Discussion Papers 21/752, School of Economics, University of Bristol, UK.
    4. Thomas Gries & Wim Naudé, 2021. "Extreme Events, Entrepreneurial Start-Ups, and Innovation: Theoretical Conjectures," Economics of Disasters and Climate Change, Springer, vol. 5(3), pages 329-353, October.
    5. Lopez-Martin, Bernabe & Leal, Julio & Martinez Fritscher, Andre, 2019. "Commodity price risk management and fiscal policy in a sovereign default model," Journal of International Money and Finance, Elsevier, vol. 96(C), pages 304-323.
    6. Juan Carlos Hatchondo & Leonardo Martinez & Yasin Kürsat Önder & Francisco Roch, 2022. "Sovereign Cocos," Working Papers 139, Red Nacional de Investigadores en Economía (RedNIE).
      • Mr. Leonardo Martinez & Juan Carlos Hatchondo & Mr. Francisco Roch & Kursat Onder, 2022. "Sovereign Cocos," IMF Working Papers 2022/078, International Monetary Fund.
    7. Hiro Ito & Robert N McCauley, 2019. "A disaster under-(re)insurance puzzle: Home bias in disaster risk-bearing," BIS Working Papers 808, Bank for International Settlements.
    8. Cevik Serhan & Ghazanchyan Manuk, 2021. "Perfect Storm: Climate Change and Tourism," Journal of Globalization and Development, De Gruyter, vol. 12(1), pages 47-61, June.
    9. Gallic, Ewen & Vermandel, Gauthier, 2020. "Weather shocks," European Economic Review, Elsevier, vol. 124(C).
    10. Alexis Louaas and Pierre Picard, 2022. "Optimal Nuclear Liability Insurance," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    11. Chen, Shuai & Gong, Binlei, 2021. "Response and adaptation of agriculture to climate change: Evidence from China," Journal of Development Economics, Elsevier, vol. 148(C).
    12. Li, Chengzheng & Cong, Jiajia & Gu, Haiying & Zhang, Peng, 2021. "The non-linear effect of daily weather on economic performance: Evidence from China," China Economic Review, Elsevier, vol. 69(C).
    13. Faccia, Donata & Parker, Miles & Stracca, Livio, 2021. "Feeling the heat: extreme temperatures and price stability," Working Paper Series 2626, European Central Bank.
    14. Julianne Sansa-Otim & Mary Nsabagwa & Andrew Mwesigwa & Becky Faith & Mojisola Owoseni & Olayinka Osuolale & Daudi Mboma & Ben Khemis & Peter Albino & Samuel Owusu Ansah & Maureen Abla Ahiataku & Vict, 2022. "An Assessment of the Effectiveness of Weather Information Dissemination among Farmers and Policy Makers," Sustainability, MDPI, vol. 14(7), pages 1-20, March.
    15. Monica Billio & Roberto Casarin & Enrica De Cian & Malcolm Mistry & Anthony Osuntuyi, 2020. "The impact of Climate on Economic and Financial Cycles: A Markov-switching Panel Approach," Papers 2012.14693,
    16. Rodolfo Manuelli, 2017. "Natural Disasters and Growth: The Role of Foreign Aid and Disaster Insurance," 2017 Meeting Papers 1118, Society for Economic Dynamics.
    17. Razmig Keucheyan, 2018. "Insuring Climate Change: New Risks and the Financialization of Nature," Development and Change, International Institute of Social Studies, vol. 49(2), pages 484-501, March.
    18. Alexis Louaas & Pierre Picard, 2014. "Optimal Insurance For Catastrophic Risk: Theory And Application To Nuclear Corporate Liability," Working Papers hal-01097897, HAL.
    19. Pardillo, Marvin, 2021. "Weather Shocks and Economic Activity. Evidence from the Philippines," Warwick-Monash Economics Student Papers 04, Warwick Monash Economics Student Papers.
    20. Marto, Ricardo & Papageorgiou, Chris & Klyuev, Vladimir, 2018. "Building resilience to natural disasters: An application to small developing states," Journal of Development Economics, Elsevier, vol. 135(C), pages 574-586.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2019/054. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.